By Hanish Patel and Open Weaver Banks

A New York Division of Tax Appeals Administrative Law Judge (ALJ) held that an electricity producer’s purchases, installations and repairs of “step-up transformers” were not subject to sales and use tax because the transformers were “used directly” in the production of electricity. Step-up transformers are used to “step up” the voltage of electricity so it may enter the transmission system, which, in turn, distributes the electricity throughout the state. The ALJ rejected the state’s argument that the step-up transformers were used in the delivery of energy, and not in the production of energy, finding instead that the step-up transformers were necessary in processing the electricity into a “saleable form” with the required voltage level. In the Matter of Entergy Nuclear Operations, Inc., DTA No. 826017 (N.Y. Div. of Tax App. Jan 28, 2016).